Why Did Ronald Coase Use Social Costs?

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Ronald Coase discovered the groundbreaking field of law and economics that won the Nobel Memorial Prize in 1991. Coase stayed ac active scholar through his career, he published several books and lunched academic journals that discussed the problem of social costs, nature of the firm, monopoly and durability, and paradigmatic example of a public good. His work over the past years is impossible to summaries adequately, however this essay will undergo the challenges that Coase concerned himself with and they way he approached them. Coase main concern was the actions of firms that impose negative externalities on others, the modest way that coase begin his paper in 1960, which permanently changed the way economists dealt with the topic of social…show more content…
We can see this behavior in most companies where like Los Angeles Post mainly uses writing produced among employees, while others increasingly rely on contractors and outside writers. However, majority work as full or part time job rather contractors. Hence, there is a vast section of the economy happening within the firm that is not governed by the market dynamics. "Outside the firm, price movements direct production, which is co-ordinated through a series of exchange transactions on the market”, (Coase, 1937). Whereas, within the firm, market transactions are eliminated completely and employs are paid with monthly salary for they’re within firm transitions. Coase further explains that participating in an open market will result into transactions costs or the cost of operation in a market, thus it is profitable for a firm to operate in an inner market. The most obvious cost of participating in open market is discovering at what price to sell a product, hence people stick to salaries to eliminate the hassle of negotiating and setting prices for each product (Coase, 1937). Coase was the beginning of substantial economics theories; one of his recent theory developers is an American economist Oliver Williamson, whose major contribution…show more content…
Monopolist will be forced to lower prices from the start due to potential customers waiting for the cuts. Essentially, the monopolist companies are competing against their future alterations of price, where this behavior is even seen in more completive market that has the same effect as bring the prices down to values equal to the marginal cost. This can’t occur for companies selling fresh food (nondurable goods). However, durable goods can be stored for long periods of time thus monopolist flourish in grabbing all potential customers (Coase, 1972). For example, once Apple Inc. sells their newest model of Iphone to the market, they release new updated version of an Iphone so they can keep on selling their phones at the same prices without the need of cutting price to grab customers; they are achieving the same result as price reduction just by releasing a newer version of the Iphone. But because some Apple fans are aware of their strategy, they hold off buying the current version and wait for the newer, which puts pressure on the prices of the current

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